| Summary of Significant Accounting Policies | Use of Estimates The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported
amounts of expenses during the reporting period. Actual results could differ from those estimates. Management makes estimates that affect certain accounts including
deferred income tax assets, accrued expenses, fair value of equity instruments and reserves for any other commitments or contingencies.
Any adjustments applied to estimates are recognized in the period in which such adjustments are determined. Basis of Presentation The accompanying
unaudited financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three-month period ended March 31, 2017 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2017. The balance sheet at December 31, 2016 has been derived from the audited
financial statements at such date. For further information, refer to the financial statements and footnotes thereto included in
ENDRA Life Sciences Inc. annual financial statements for the year ended December 31, 2016 included in Amendment No. 10 to the Company’s
Registration Statement on Form S-1 filed with the SEC on May 1, 2017. Cash and Cash Equivalents The Company considers all cash
on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments
with maturities of three months or less, when purchased, to be cash and cash equivalents. As of March 31, 2017 and December 31,
2016 the Company had no cash equivalents. Inventory The Company's inventory is stated at the lower of cost or estimated
realizable value, with cost primarily determined on a weighted-average cost basis on the first-in, first-out (“FIFO”)
method. The Company periodically determines whether a reserve should be taken for devaluation or obsolescence of inventory. As
of March 31, 2017 and December 31, 2016 no such reserve was taken. Capitalization of Fixed
Assets The Company capitalizes expenditures
related to property and equipment, subject to a minimum rule, that have a useful life greater than one year for: (1) assets purchased;
(2) existing assets that are replaced, improved or the useful lives have been extended; or (3) all land, regardless of cost. Acquisitions
of new assets, additions, replacements and improvements (other than land) costing less than the minimum rule in addition to maintenance
and repair costs, including any planned major maintenance activities, are expensed as incurred. Capitalization of Intangible
Assets The Company records the purchase
of intangible assets not purchased in a business combination in accordance with the ASC Topic 350. Revenue Recognition The Company recognizes revenue in accordance with the requirements
of ASC 605-10-599, which directs that it should recognize revenue when (1) persuasive evidence of an arrangement exists (contracts);
(2) delivery has occurred; (3) the seller’s price is fixed or determinable (per the customer’s contract); and (4) collectability
is reasonably assured (based upon our credit policy). For products sold to end users revenue is recognized when title has passed
to the customer and collectability is reasonably assured; and no further efforts are required. Future revenue from anticipated
new products will follow this same policy. Advertising Expense The cost of advertising is expensed as incurred. Advertising expense
for the three months ended March 31, 2017 was approximately $93. Advertising expense for the three months ended March 31,
2016 was approximately $180. Income Taxes The Company utilizes ASC 740, “Income Taxes,” which requires
the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included
in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the
difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance
is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized. The Company generated a deferred tax asset through net operating
loss carry-forwards. However, a valuation allowance of 100% has been established due to the uncertainty of the Company’s
realization of the net operating loss carry forward prior to its expiration. Research and Development Costs The Company follows ASC 730-10, “Research and Development”.
Research and development costs are charged to the statement of operations as incurred. During the three months ended March 31,
2017 and 2016 the Company incurred $95,814 and $95,237 of expenses related to research and development costs, respectively. Net Earnings (Loss) Per Common Share The Company computes earnings per share under
ASC Subtopic 260-10, Earnings Per Share (“ASC 260-10”). Basic earnings (loss) per share is computed by dividing the
net income (loss) attributable to the common stockholders (the numerator) by the weighted average number of shares of common stock
outstanding (the denominator) during the reporting periods. Diluted loss per share is computed by increasing the denominator
by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock
(using the “treasury stock” method), unless their effect on net loss per share is anti-dilutive. There were 1,526,004
and 1,346,441 potentially dilutive shares, which include outstanding common stock options, warrants, and convertible notes, as
of March 31, 2017 and December 31, 2016. The potential shares, which are excluded from
the determination of basic and diluted net loss per share as their effect is anti-dilutive, are as follows:
March 31, 2017 December 31, 2016
Options to purchase common stock 151,881 151,881
Warrants to purchase common stock 151,563 152,812
Convertible notes 1,222,561 1,041,748
Potential equivalent shares excluded 1,526,005 1,346,441 Fair Value Measurements Disclosures about fair value
of financial instruments require disclosure of the fair value information, whether or not recognized in our balance sheet, where
it is practicable to estimate that value. As of March 31, 2017 and December 31, 2016, the amounts reported for cash, accrued liabilities
and accrued interest approximated fair value because of their short maturities. In accordance with ASC Topic
820, “Fair Value Measurements and Disclosures,” we measure certain financial instruments at fair value on a recurring
basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles
generally accepted in the United States, and expands disclosures about fair value measurements. Fair value is defined as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
● Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
● Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Share-based Compensation The Company’s 2016 Omnibus Incentive Plan, which has been approved by its board of directors, permits the grant of share options and shares to its
employees, consultants and non-employee members of the board of directors for up to 1,345,074 shares of common stock, of which
approximately 500,000 remain available to be granted. The Company records share-based compensation in accordance with the provisions
of the Share-based Compensation Topic of the FASB Codification. The guidance requires the use of option-pricing models that require
the input of highly subjective assumptions, including the option’s expected life and the price volatility of the underlying
stock. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option valuation model, and
the resulting charge is expensed using the straight-line attribution method over the vesting period. The Company has elected to
use the calculated value method to account for the options it issued in 2017 and 2016. A nonpublic entity that is unable to estimate
the expected volatility of the price of its underlying share may measure awards based on a “calculated value,” which
substitutes the volatility of appropriate public companies (representative of the company’s size and industry) as a bench
mark for the volatility of the entity’s own share price. Currently, there is no active market for the Company’s common
shares. The Company has used the historical closing values of these companies to estimate volatility, which was calculated to be
90%. Stock compensation expense recognized during
the period is based on the value of share-based awards that were expected to vest during the period adjusted for estimated forfeitures.
The estimated fair value of grants of stock options and warrants to non-employees of the Company is charged to expense, if applicable,
in the financial statements. These options vest in the same manner as the employee options granted under each of the option plans
as described above. Beneficial Conversion Feature If the conversion feature of conventional convertible debt provides
for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”).
A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.”
In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount
to interest expense over the life of the debt using the effective interest method. Debt Discount The Company determines if the convertible debenture should be accounted
for as liability or equity under ASC 480, Liabilities — Distinguishing Liabilities from Equity. ASC 480 applies to certain
contracts involving a company’s own equity, and requires that issuers classify the following freestanding financial instruments
as liabilities. Mandatorily redeemable financial instruments, obligations that require or may require repurchase of the issuer’s
equity shares by transferring assets (e.g., written put options and forward purchase contracts), and certain obligations where
at inception the monetary value of the obligation is based solely or predominantly on:
● A fixed monetary amount known at inception, for example, a payable settleable with a variable number of the issuer’s equity shares with an issuance date fair value equal to a fixed dollar amount;
● Variations in something other than the fair value of the issuer’s equity shares, for example, a financial instrument indexed to the S&P 500 and settleable with a variable number of the issuer’s equity shares; or
● Variations inversely related to changes in the fair value of the issuer’s equity shares, for example, a written put that could be net share settled.
Going Concern The Company’s financial
statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”)
applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal
course of business. The Company has a limited operating history and had a cumulative net loss from inception to March 31,
2017 of $13,260,096. The Company has a working capital deficit of $1,659,184 as of March 31, 2017. The Company has not yet
established an ongoing source of revenue sufficient to cover its operating costs and to allow it to continue as a going
concern. The accompanying financial statements for the period ended March 31, 2017, have been prepared assuming the Company
will continue as a going concern. The Company believes its cash resources are insufficient to meet its anticipated needs
during the next twelve months. The Company will require additional financing to fund its future planned operations, including
research and development and commercialization of its products. The ability of the Company to continue as a
going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream
and becomes profitable. Management’s plans to continue as a going concern include raising additional capital through sales
of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing
any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be
forced to delay or scale down some or all of its development activities or perhaps even cease the operation of its business.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully secure other sources of
financing and attain profitable operations. There is substantial doubt about the ability of the Company to continue as a going
concern within one year after the date that the financial statements are issued. The accompanying financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as a going concern. Recent Accounting Pronouncements In May 2014, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue
from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all
existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining
revenue recognition. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services
and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those
goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue
and cash flows arising from contracts with customers. The FASB has recently issued ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU
2016-12, and ASU 2016-20, all of which clarify certain implementation guidance within ASU 2014-09. ASU 2014-09 is effective
for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting
periods beginning after December 15, 2016, including interim periods therein. The standard can be adopted either
retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative
effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition
method). The Company is currently in the process of analyzing the information necessary to determine the impact of adopting
this new guidance on its financial position, results of operations, and cash flows. The Company plans to adopt the
provisions of this statement in the first quarter of fiscal 2018. In February 2016, the FASB issued ASU No. 2016-02,
Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for
all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after
December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital
and operating leases existing at, or entered into after, the beginning of the earliest period presented in the financial statements.
The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09,
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in this
ASU require, among other things, that all income tax effects of awards be recognized in the income statement when the awards vest
or are settled. ASU 2016-09 also allows for an employer to repurchase more of an employee's shares than it can today for tax withholding
purposes without triggering liability accounting and allows for a policy election to account for forfeitures as they occur. [The
amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those
fiscal years.] Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating
the expected impact that the standard could have on its financial statements and related disclosure. Other recent accounting pronouncements issued
by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities
and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future
financial statements. |
